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Analyst: Why Jim Dolan Could Sell The New York Knicks

Analyst: Why Jim Dolan Could Sell The New York Knicks
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After the $2.2-billion sale of the Houston Rockets, an unloading of the New York Knicks by owner Jim Dolan could be a slam dunk.

Madison Square Garden Co (NYSE: MSG) and live entertainment are the Dolan family’s focus, and the company’s executive chairman has said sports are in a “bubble” and face shrinking revenues, BTIG Research analyst Brandon Ross said in a note.

The company is likely to go private, and the sale of the Knicks could pave the way for such a move and provide a cash influx for an “aggressive expansion” in the remaining live entertainment business, Ross said.

Macquarie Research recently valued the Knicks at $3.5 billion. Monday’s BTIG note questioned whether the team could pull more than $4 billion in a sale.

BTIG maintains a Buy on Madison Square Garden Co. with a $260 price target (see Ross' track record here).

“If the Dolans do not monetize their sports interests, a separation of the sports teams from the rest of [Madison Square Garden] makes sense in the near future,” Ross said.

The Future Of Broadcasting Revenue

Dolan has been pulling back from legacy television: First with the stock split of Madison Square Garden Co. and MSG Networks Inc., then with the sale of Cablevision to Altice USA Inc (NYSE: ATUS), according to BTIG.

The 62-year-old Dolan, who also owns the New York Rangers NHL team, said at this year’s Consumer Electronics Show in Las Vegas that sports team revenues will shrink as multichannel video programming distributor bundles decline.

“All of that advertising, if that system falls apart — which it looks like it is starting to erode now — it will not even come close to that kind of production of rights value, and that’s really the thing we will all have to grapple with,” he said, according to BTIG.

While the research firm said its take on sports broadcasting revenue is in line with Dolan’s, Ross said it’s worth asking whether new digital buyers will bid up sports rights when the deals in place today expire., Inc. (NASDAQ: AMZN) and Facebook Inc (NASDAQ: FB) are experimenting with licensing sports, “but how aggressive they will be is an uncertainty,” Ross said.

The NBA’s national TV deal expires in 2025, the analyst said.

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Latest Ratings for MSG

Dec 2017Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2017Loop CapitalMaintainsBuy
Aug 2017JefferiesMaintainsHold

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